The Credit Card Fair Fee Act of 2008 has come into legal force, promising financial relief for both retailers and their cards using customers. The new legislation is expected to curb credit card interchange fees or at least make them fairer.What is a credit card interchange, also called transaction, fee, when is it applied and who pays it? While you, as an ordinary credit card holder looking for payment convenience and credit rewards, may not even guess what this fee is designed for, a merchant suffers from the bitter truth.Interchange fee is a fee set by major card processing companies, Visa and MasterCard, and imposed on retailers accepting credit cards as a form of payment.Companies explain the necessity to charge transaction fees by the need to cover credit card processing expenses. How is a common credit consumer affected? As every credit card transaction at a store costs the retailer a transaction fee, the retailer shifts part of this fee to the customer in the form of a higher price. Thus, the merchant preserves a decent level of the daily revenues.

This is generally acknowledged as an unfair, predatory policy on the part of credit companies and an affective solution had been brewing for quite a time already. So, what will change under the Credit Card Fair Fee Act of 2008?The bill will enable small and big businesses to negotiate the transaction fee rate directly with the companies establishing it or with banks that represent these companies.

Collective negotiations will be allowed to make it possible for merchants to bargain a fairer rate.As to Congress, armed with the new legislation, they have sent a letter to Visa Card Company, requesting its representatives to provide exhaustive explanation of the guidelines used for setting the transaction fee rates. As of today, the rate is established on a non-negotiable basis and the establishment method as well as data used to do it is still unknown.

Some experts warn that once credit card interchange fees are cut, cardholders’ ability to enjoy credit perks  and earn rewards will get a hit. Though card companies maintain that they use the transaction fee revenues to cover the card processing costs, research shows that major part of the revenues goes to support the generous rewards programs so loved by cardholders. Who do you think will pay for your cash back bonus or free airline ticket? Who makes all those enhanced points redemption options possible? Your card company does.

And a poll shows that most cardholders are so eager and happy to be enrolled into a profitable rewards program that they even do not mind or simply do not guess they actually pay for this enrollment.Ok, let it be so. If you pay your balances in full and no interest is charged on your rewards plastic, those air miles, hotel rewards cash back are really profitable. But do admit that if you were to pay fewer dollars per item at a store, you would be much better off and your consumer right would not be abused.The Credit Card Fair Fee Act of 2008 is designed to protect merchants’ interests and customers’ wallets

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